Related Topics

LONDON/TRIPOLI (Reuters) - Libya is having to pay extra for food imports and traders say some foreign firms are diverting shipments elsewhere due to fears - dismissed as unfounded by Tripoli - that growing disarray in the country could delay payments.

The North African state, much of which is desert, is a big food buyer and has stepped up purchases of staples including wheat and sugar since the end of fighting last year that toppled dictator Muammar Gaddafi.

Tripoli shop shelves are now full of foreign produce. But while international traders had viewed oil producing Libya as a lucrative market, some now say they are backing off from trade.

"Libya has a huge amount of oil wealth, but its chaotic administration and fears about non-payment are still giving it a bad reputation in international trade," a European grain trader said.

Companies contacted by Reuters could not cite concrete cases of default by Libyan importers, but rather unease that payment could be delayed, not least by cumbersome bureaucracy.

"There is an unspoken Libya premium in the grain trade which the country has to pay for grain imports despite the fact that its huge oil wealth should make it a grade one customer to sell to," another European grain trader said.

"Traders need the extra money because of payment risks and the general uncertainty in the pretty chaotic government there."

Traders cited a November 14 tender where Libya paid $395 per tonne on a cost and freight (c&f) basis for 30,000 tonnes of soft wheat.

"On the very same day, Jordan, by no means a rich country but a reliable...trading partner, paid only $378 a tonne c&f for 50,000 tonnes of higher quality wheat including more expensive shipment costs," the second trader said.

Libya's main grains buyers are the Matahan agencies in Tripoli and Benghazi, which issue tenders and sell milled goods to the state agency that ensures stable food prices through subsidies.

While this process gives some protection to Libyans, the higher import prices will be costly for the subsidy mechanism.

There are also smaller private buyers.

Officials denied there were any problems for foreign companies in securing payment, but some recognised an issue with perceptions of Libya after the widely publicised conflict.

"IT'S MORE THE CONFIDENCE"

"For the credit there is no problem, the commercial relationship is clear, it's more the confidence," said a marketing official at Matahan Tripoli.

"There are still companies that are afraid about the situation in Libya after last year's events."

The official said some traders were calling for more money, but added: "It will improve, there will be better conditions."

Matahan Benghazi Chairman Suleiman al-Deeb, who took over after the war, said the industry met international standards.

"Banks guarantee our transactions; when (goods) arrive with the required specifications, the bank will pay the financial value immediately as provided in the issued contracts," he said.

Libya's new rulers successfully led the nation to its first free elections in July but security has worsened in a country awash with weapons. They have also inherited an economy in disarray, dependent on the central government and long plagued by corruption.

Libya's wheat consumption is estimated to reach 1.65 million tonnes in 2012/13, unchanged from 2011/12 and only slightly down from 1.7 million tonnes in 2010/11, U.S. agriculture department data shows. Almost all of it is imported.

Libya is also dependent on imports of white sugar and annual sugar consumption is estimated to have averaged around 230,000 to 235,000 tonnes in recent years, ISO data showed.

Two separate trade sources said they were aware of some white sugar cargoes being diverted to other destinations in recent weeks due to concerns over getting paid on time.

"There are growing payment problems and I am pulling back from the Libyan sugar market. The country has not stabilised enough yet politically or economically," a Middle East-based commodities trader said. "The sense is people are becoming more careful about trading with Libya."

A European-based sugar trader added: "The trade is really not confident about that country at the moment."

Libya's subsidiser, the Price Stability Fund - which buys wheat flour, tomato paste, sugar and rice - says it has not issued any international sugar tenders in 2012, but had been buying from Libyan companies following last year's war.

Several sugar traders cited additional paperwork, such as a certificate of final approval from Libya's health authorities, before payments are secured for shipped goods. Some contracts from last year are also said to be still under audit.

BUREAUCRACY "TOO COMPLICATED"

"For a trader who is already busy, you think they have time to deal with this? For some it's just getting too complicated," another trading source said.

Others said there were worries over the potential spread of graft after the ending of Gaddafi's rule, which entrenched corruption. Libya ranked 168 out of 183 nations in Transparency International's annual corruption perceptions index last year.

"(Corruption) will be an obstacle in the face of our efforts to develop our wealth," Libyan national congress leader Mohammed Magarief said on television last week. "Corruption is a culture we inherited from the past and we need to put an end to it."

Magarief's deputy Salah Makhzoum told Reuters the congress had formed a committee to look at how to fight corruption. He said there was also a committee that oversaw foreign trade.

The deadly attack on the U.S. consulate in Benghazi in September was a reminder of the lawlessness plaguing the country where the government has struggled to impose its authority on a myriad of armed groups that have yet to lay down their weapons.

Benghazi's police chief was assassinated last month, the latest security incident in the cradle of Libya's revolution.

A new government was sworn in in November, but several proposed ministers, including the interior minister, have yet to take up their posts as their credentials were queried.

"On the one hand, it will take years for Libyans to overcome the culture of distrust and corruption which is Muammar Gaddafi's true legacy," J. Peter Pham, Africa director with U.S. think tank the Atlantic Council said.

"On the other hand, the country does not have the luxury of time if it is to generate enough momentum in terms of economic growth and social and political development to give its various groups enough reason not to tear the country apart."